A virtual data room (VDR) is a cloud-based repository of documents and other files. It is used to share confidential information during complex business transactions, like mergers and acquisitions as well as due diligence processes, financial audits, fundraising rounds, and legal processes. In comparison to traditional physical storage, VDRs provide greater control over access and security while cutting down on management costs.

When selecting the best VDR provider, be sure that you choose a provider that is robust and has a comprehensive set of features to accommodate the requirements of your company. For instance, you might be interested in determining if the platform complies with ISO 27081 standards for data security or is equipped with robust malware and virus scanning with an uptime of more than 99.9 percent and multifactor authentication to ensure that your data is protected. Similarly, look for customization options, like color-coding, to quickly identify certain documents in internal meetings. Additionally, you can get in-depth reports that provide executives from the C-suite with the information they require.

A VDR is most commonly used in M&A transactions, where potential buyers go through a lot of documents of the companies which are being sold. M&A virtual data rooms enable a more efficient due diligence process and reduce risk by restricting access to confidential information to only those people who need to access it. During an M&A transaction the users also benefit from the ability to collaborate effectively through a VDR’s question and answer and comments sections. This boosts productivity and speeds decision-making. M&A VDRs also provide you with full audit trails that are necessary for M&A diligence.